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It doesn't matter what phrase we coin to describe Scottish independence. What matters is that it's democratic

WAR-DEAD in warning against independence!

Last week, the former Scottish secretary, Lord Lang, claimed that independence would "dishonour" the memory of British soldiers who died in the First World War. True, just because they are deceased doesn't mean they shouldn't have a say. But what about the Scottish soldiers who died in Flodden? Shouldn't they have a say too?

It is true that Scotland and English soldiers fought together for centuries, but seriously: no-one thinks they would start fighting on different sides if Scotland votes Yes. Independence isn't what it used to be. In an interdependent world there is no such thing as true independence, merely shifting degrees of pooled sovereignty.

We had the most striking confirmation of this last week when the Scottish Finance Secretary, John Swinney, enthusiastically endorsed the call from the governor of the Bank of England, Mark Carney, for monetary and fiscal union after independence. Now, this is actually what the SNP have been hinting at for years: that independence would really be a form of federalism in which much economic power would remain at the centre, in Westminster. But never has it been presented quite so starkly as last week.

In the past, Nationalists would at least have pretended to be outraged at the idea of Scottish public spending, borrowing, banking and even some taxes being under the sway of London. "Wha daur meddle wi me?" as it says on the Scottish coat of arms. Well, the Bank of England and the Treasury, clearly.

Alistair Darling of Better Together whooped that Swinney's acceptance of fiscal and political union made a nonsense of the SNP's policy of independence. He presumably thinks that Scotland should be going it alone like Iceland, or Ireland in the 1930s. But Nationalists in Scotland have realised long since that separatism is an anachronism in the modern world. After all, their headline policy for the last 25 years has been "independence in Europe", which itself involves ceding sovereignty to Brussels.

I have to say this constitutional realism represents remarkable maturity in the SNP. Perhaps too much maturity. For, in their desperation not to appear separatist, they risk creating shackles for a future Scottish government of the left, or the right. Or at any rate defining too narrowly the range of possibilities of Scottish independence.

An independent Scotland would almost certainly reject Tory austerity policies at least in the early years. It would want to increase public spending in a recession, just as the Nobel-prizewinning economist Robert Stiglitz has advised. Keynesian economists say that the UK's economic recovery was delayed by self-defeating Tory spending cuts. But this is exactly where fiscal union limits freedom. Carney is very clear that the central authority, basically the Bank of England and the UK Treasury, would - in consultation with the Scottish Government - have the final say on spending and borrowing in Scotland.

In the eurozone, governments are supposed to stick to a deficit limit of 3% of GDP in the Maastricht "stability pact" (they don't, but never mind). Would Scotland be happy to stick to a deficit rule made by London, by a Treasury run by a Tory chancellor? On the other hand, say an independent Scottish government wanted to slash taxes to boost immigration. A Labour chancellor might say it was unfair, destabilising and contrary to the principles of currency union that Scotland voluntarily joined.

Carney referred throughout his Edinburgh speech to the fiscal union that is evolving in the European Union. This involves raising taxes centrally to fund a common treasury to even out economic imbalances and resolve banking crises. It is needed to prevent a situation arising in which high-spending countries, like Greece, go bust and need billions in bailout money from the European Central Bank. In exchange for bailout cash, the ECB and the EU demanded tax rises and spending cuts in Greece that actually makes the recession there even worse. So there needs to be an independent federal authority in future that both the Greeks and Germans trust.

Now, I am not saying, and neither was Carney, that Scotland is like Greece; or that Scotland would have no say over the tax and spending rules in a UK monetary union. The Scottish and English economies are very similar in terms of productivity, GDP per head, tax and spending levels etc. The governor conceded that, with a common language and trading history, Scotland and England were in many ways ideal partners for a currency union.

And a fiscal and currency union doesn't mean Scotland can't call itself an independent country. Countries pool sovereignty in Europe now and that doesn't mean they aren't independent. It just means that there will have to be a very large degree of co-operation after independence.

There's no reason why this shouldn't happen. Only an imbecile seriously thinks that the UK would refuse to let Scotland use the pound, which is anyway common UK property. Or that the UK would set terms that crippled Scotland. Scotland and England have co-operated for the last 300 years and that would surely continue whatever Better Together say.

You could call this independence lite, federalism or even devolution max - it doesn't really matter. It would just be another dimension to the relationship between Scotland and England that has endured, in the Union, for centuries. Indeed, you could call it Union-plus, or my favourite: independence in the UK. It's the way of the world in the age of economic and financial interdependency. My only problem with the SNP's version of it is that they leave out of account one vital factor: democracy.

Should Scots not have a democratic voice in the UK institutions that determined tax, spending, currency and even possibly welfare policies? In Europe, there is at least the European Parliament, which helps make pooled sovereignty democratically legitimate. We elect MEPs every four years, and while they don't have enough real power, that is no reason for extinguishing the parliament.

The SNP would never call for MEPs to be withdrawn from Brussels, but it is calling for all Scotland's MPs to be withdrawn from Westminster. I'm not sure that this makes a lot of sense. Westminster is not a federal parliament - but it is a parliament, the only UK parliament we're likely to have. Does it really make sense not to have a voice there?

And a final point. If the SNP really don't want anything to do with Westminster, would it not make sense to look at the option of Scotland having its own currency? Many countries in Europe have found having their own currencies useful, at least before joining the euro.

Indeed, should Scotland not retain the option joining the eurozone? It isn't going away, you know, and Britain may be about to leave the EU.

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